A monopolistic competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20.
Price (dollars) |
Quantity |
30 |
1 |
26 |
2 |
22 |
3 |
19.58 |
4 |
14 |
5 |
10 |
6 |
6 |
7 |
If the firm has a constant marginal cost of $7 per unit, what total variable cost will the firm incur at the profit-maximizing level of output?
Price (dollars) | Quantity | TR | MR |
30 | 1 | 30 | 30 |
26 | 2 | 52 | 22 |
22 | 3 | 66 | 14 |
19.58 | 4 | 78.32 | 12.32 |
14 | 5 | 70 | -8.32 |
10 | 6 | 60 | -10 |
6 | 7 | 42 | -18 |
A monopolistic competitive firm will produce output, when MR = MC.
On this basis, the firm will produce 4 units of output, because afterwars MR becomes negative and it is less than MC of $7.
So,
Output produced = 4 units
Total variable cost = 4*7
Total variable cost = $28 ( at profit maximizing level of output)
A monopolistic competitive firm faces the following demand schedule for its product. In addition, the firm...
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